You’ve likely heard about Bitcoin by now. That’s what I intend to cover this week. Not in any detail, I’m going to explain it at a high level without delving into its deep dark mysteries. Nor will I tell you how top open account or use it. If want to do things like that you should learn a lot more about it before indulging.
What is Bitcoin? In a nutshell, it’s a “cryptocurrency,” one of the first, and there are hundreds now. OK, so what is a cryptocurrency? Well, let’s examine that by comparing it with a bank account and money (dollar bills, etc., which are also called “fiat money” — see https://go.ttot.link/FiatMoney for more details).
Your bank holds your money in an account that you can access with a debit card or a check or by going to the bank and identifying yourself. Cryptocurrency (or crypto) is held in an account, too. You set up the account with a crypto exchange. Unlike a bank, you don’t have to identify yourself. Like your bank account you’ll get a public account identifier which is a long string of characters, and you’ll use that public identifier to buy and sell things. You’ll also either be given a digital key that is cryptographically linked to your account identifier or you’ll be asked to create a password. If you create a password, make sure that it follows the guidance for creating a good, strong password (see https://go.ttot.link/StrongPasswords for some tips).
In either case, be sure to record your account identifier and your digital key someplace safe because anyone who has your account identifier and key has complete access to all the funds in that account. Lose the account identifier or the key and your crypto is lost!
You store your cryptocurrency in a digital wallet. A crypto digital wallet can be a physical device like a specially designed thumb drive, it can be a software program, or it can be stored by an online wallet provider (note that Apple Pay and Google Pay are also digital wallets but they hold fiat money). You buy crypto with fiat money at a crypto exchange at the current exchange rate, not unlike “buying” English Pounds or Japanese Yen with U.S. dollars. With funds in your crypto digital wallet you can pay for things and exchange one crypto for another.
Continuing with our comparisons to transactions with fiat money, when you buy something with cash, the transaction is anonymous. No one besides you and the entity at the other end of the transaction know it’s happened. But when you pay with a check or a debit or credit card, that transaction is recorded and, because your accounts are tied to you, ultimately all those transactions can be traced to you.
Crypto transactions are anonymous. You’re not using a checking account or a credit card account, you’re using your crypto account’s public identifier and no one but you knows that wallet belongs to you. The seller only knows that they were paid from a crypto account with a particular identifier. Of course, if you buy something that must be shipped to you, there is an obvious linking of you to that transaction but otherwise it is anonymous.
When paying with fiat money you get a receipt and that is your record of the transaction. What sort of receipt do you get with crypto transactions? You’ll get a transaction identifier. And what good is that? Well, all crypto transactions are recorded by their transaction identifier in a ledger. If you’re using a public cryptocurrency like Bitcoin or Ethereum, that ledger is available on the Internet and is accessible to anyone who wants to look at it. The transactions are stored as a series of blocks that are chained together – hence the term “blockchain.” The ledger is designed so that it is “immutable,” meaning it is effectively impossible to change any previous transaction, so, at any point in the future, you or anyone else can go back and look at the transaction if they have your transaction identifier, i.e. your crypto receipt.
That’s all for this week’s column. I hope this explanation to some extent demystifies cryptocurrency and blockchain. Some people buy cryptocurrencies as an investment. I don’t. Their price tends to vary too much for me so if I buy $100 worth of Bitcoin today, tomorrow it may only be worth $90. I haven’t spoken about NFTs (Non-Fungible Tokens) which is another cryptocurrency-related item. l’ll take that up in another column.
As always, my intent with these columns is to spark your curiosity, give you enough information to get started, and arm you with the necessary keywords (or buzzwords) so you’ll understand the basics and are equipped to search for more detailed information.
Please feel free to email me with questions, comments, suggestions, requests for future columns, whatever at tony@TonysTakeOnTech.com or just drop me a quick note and say hi! And don’t forget that I maintain links to the original columns with live, clickable links to all the references at https://go.ttot.link/TGColumns+Links or https://go.ttot.link/TGC+L. It should be updated shortly after this column appears online.
Tony Sumrall, a Hillsboro native whose parents ran the former Highland Lanes bowling alley, is a maker with both leadership and technical skills. He’s been in the computing arena since his graduation from Miami University with a bachelor’s degree in systems analysis, working for and with companies ranging in size from five to hundreds of thousands of employees. He holds five patents and lives and thrives in Silicon Valley which feeds his love for all things tech.